In May 2022, the Company purchased certain assets and assumed certain liabilities associated with the V-Go wearable insulin delivery device from Zealand Pharma A/S and Zealand Pharma US, Inc. (together “Zealand”).

Under the terms of the agreement with Zealand, the Company paid up-front consideration of $15.3 million for certain assets and assumed liabilities related to V-Go. In addition, the Company will be obligated to make one-time, sales-based milestone payments to Zealand totaling up to a maximum of $10.0 million upon the achievement of specified annual revenue milestones between $40 million and $100 million.

The total preliminary purchase consideration for V-Go was as follows (in thousands):


Fair value of consideration:	Amount
Cash consideration	$	15,341
Fair value of contingent consideration		610
Total	$	15,951

The transaction was accounted for using the acquisition method of accounting, which requires, among other things, the assets acquired and liabilities assumed to be recognized at their respective fair values as of the acquisition date. The excess of the purchase price over those fair values was recorded as goodwill, which will be amortized over a period of 15 years for tax purposes. The estimates and assumptions used include the projected timing and amount of future cash flows and discount rates to reflect the risk inherent in the future cash flows. The estimated fair values of assets acquired and liabilities assumed and resulting goodwill are subject to adjustment as the Company finalizes its purchase price accounting. The significant items for which a final fair value has not been determined include, but are not limited to the valuation of the intangible asset and assumed liabilities for rebates and return reserves. The Company does not expect its fair value determinations to materially change; however, there may be differences between the amounts recorded at the acquisition date and the final fair value analysis, which is expected to be complete no later than the second quarter of 2023.

The information below reflects the amounts of identifiable assets acquired and liabilities assumed as of March 31, 2023 (in thousands):


	Amount
Assets:
Inventory	$	11,152
Property and equipment		2,921
Goodwill(1)		1,998
Intangible asset - Developed technology		1,200
Operating lease right-of-use assets		1,812
Total assets		19,083
Liabilities:
Liabilities assumed(1)		1,320
Operating lease liability		1,812
Total liabilities		3,132
Net assets acquired	$	15,951

___________________________

(1)

During the three months ended March 31, 2023, goodwill related to the acquisition of V-Go was adjusted for a reduction in rebate-related liabilities established at the time of acquisition.

Inventory of $11.2 million consisted of raw materials, semi-finished goods and finished goods. The fair value of the inventory was determined based on the estimated selling price to be generated from the finished goods, less costs to sell, including a reasonable margin, which are level 3 inputs not observable in the market. Property and equipment and assumed liabilities were recorded at their carrying amounts which were deemed to approximate their fair values based on level 3 unobservable inputs. The fair values of the right-of-use assets and lease liabilities for assumed operating leases were assessed in accordance with ASC Topic 842, Leases, based on discounted cash flow from lease payments, utilizing the Company’s incremental borrowing rate of 7.25%.

The fair value of the intangible asset was determined by applying the income approach based on significant level 3 unobservable inputs. The income approach estimates fair value based on the present value of cash flow that the assets could be expected to generate in the future. We developed internal estimates for expected cash flows in the present value calculation using inputs and significant assumptions that include historical revenues and earnings, long-term growth rate, discount rate, contributory asset charges and future tax rates, among others.

The fair value of the contingent milestone liability was estimated using the Monte Carlo simulation method for the calculation of the potential payment and the Geometric Brownian Motion forecasting model to estimate the underlying revenue. Market based inputs and other level 3 inputs were used to forecast future revenue. The key inputs used included a risk-free rate of 2.95%, dividend yield of 0%, volatility of 65%, period of 15 years and credit risk of 12%.

There were no acquisition-related costs incurred during the three months ended March 31, 2023.

Net revenue for the three months ended March 31, 2023 was $5.1 million and loss from operations for the three months ended March 31, 2023 was $1.0 million. The following unaudited pro forma summary presents consolidated information of the Company as if the acquisition had occurred on January 1, 2022 (in thousands):


	Three Months Ended March 31,
	2023			2022
Net revenue	$	40,626		$	18,090
Net loss		(9,795	)		(25,741	)
Net loss per share - basic and diluted		(0.04	)		(0.10	)

These pro forma amounts have been calculated by applying the Company’s accounting policies assuming transaction costs had been incurred beginning January 1, 2022. The Company did not have any other material nonrecurring pro forma adjustments directly attributable to the acquisition included in the reported pro forma revenue and loss.